Manage Smarter 50 — Michael Houlihan: The Money Map Every Manager Should Show Employees

HOSTED BY C. LEE SMITH AND AUDREY STRONG
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Michael Houlihan is the co-​founder of Barefoot Wine, now, the world’s largest wine brand. He, along with Bonnie Harvey, are consultants, international Keynote Speakers and the New York Times Bestselling authors of The Barefoot Spirit, How Hardship Hustle and Heart Built America’s #1 Wine Brand and The Entrepreneurial Culture, 23 Ways to Engage and Empower Your People.

In this episode, Audrey, Lee and Michael discuss The Money Map along with:

  • The definition of The Money Map and why every manager should show this to their employees
  • How to get employees to understand where their salaries come from
  • How to identify and hire a “hustle” mentality
  • Hiring tips/​exercises for rooting out good employees to represent your organization
  • The unique concept of a Two-​Division Company (Sales and Sales Support)

“We had to pay our bills, and with what was left, we used that to pay the salaries. All of the sudden they went, wow! It was clear. There was no question how the money got to them and they could also see their job in the context of the map.“

- Michael Houlihan

The next episode will be a "Best of" episode on December 30, 2018 for heading into the new year with a winning attitude. Season 2 of the Manage Smarter podcast launches with several great new episodes starting on Sunday January 6, 2019.

The Money Map Downloadable Bonus Content: 

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The Money Map Every Manager Should Show Employees

00:23:54

This episode of Manage Smarter is presented by SalesFuel Consulting, leading experts for assessing and transforming management, sales culture, and team performance. Learn more at SalesFuel​.com. 

Welcome to the Manage Smarter podcast with host C. Lee Smith and Audrey Strong. We're glad you're here for discussions on new ways to manage smarter, hire, develop, and retain talent, improve results, and propel team performance to new heights. This is the Manage Smarter Podcast.

Audrey Strong: Welcome, everyone, to the Manage Smarter Podcast. We're so glad that you're here today. I am Audrey Strong. I'm the vice president of communications here at Sales Fuel.

C. Lee Smith: And I'm C. Lee Smith, the president and CEO of SalesFuel. And no, I do not have a money tree growing out in my backyard.

Audrey Strong: No. That's why you need a money map of Michael Houlihan is the man who's going to explain what that means. Michael, thanks for joining us today.

Michael Houlihan: It's a pleasure.

Audrey Strong: Michael Houlihan, everybody, is the co-​founder of Barefoot Wine, now the world's largest wine brand. He along with Bonnie Harvey, are consultants, international keynote speakers, and the New York Times Bestselling authors of a couple of books, one is called The Barefoot Spirit, How Hardship Hustle and Heart Built America's #1 Wine Brand and The Entrepreneurial Culture, 23 Ways to Engage and Empower Your People. We heard Michael speak in San Francisco about how employees can be trained to think like owners and entrepreneurs, and it was dynamite, and Michael's money map is the topic for today. So Michael, we can't wait for you to share this with our listeners.

Michael Houlihan: Okay. So obviously when you have a business, everybody who works for you is in sales, everybody who works for you represents your business. You're very dependent on them for lots of ideas. There's not a company out there that doesn't want to engage and empower their people, or so they say. So, one of the things we did at Barefoot — and this is after years of doing it wrong, mind you — we figured out that people were coming from other companies and they really didn't know where the money was coming from. They didn't know where the money that was going into their own check was coming from. They had this vague idea that somehow it came from our company. They had this idea that somehow it came from some magical place. They never really were able to put their finger on where the money came from. And we thought, "Well, isn't that stupid?" Isn't that crazy that people could work in their careers and not realize that the money really comes from the customer? Period. There's no doubt about it. And they all vaguely knew that, but they thought that Bonnie and I had a big rock candy mountain out behind our house. If they needed a raise, we'd just go back there and shovel them some gold or something then drive away.

Audrey Strong: There you go.

Michael Houlihan: But they didn't really put it together that in order for us to have money to pay them we had to make sales, in order to make sales we had to please the customer, and that it required a complete support system. In our company we only had two divisions—we had sales and we had sales support. So if you were not in sales, you were in sales support. And that was the CEO, the CFO, the CMO, the VP, even the P, the whole alphabet, we were all in sales support, and that means that we had a support sales.

So, we decided that the best thing you can do when you hire people is to give them a money map. It's just like a treasure map, only we called it the money map, and it ends with their paycheck, but it starts with the customer. But the money goes through a lot of twists and turns and jumps a lot of hoops, but between the time it leaves the customer's purse until it gets into your employee's paycheck. But many people didn't know that. So we showed it, we graphically drew it out. We showed, for instance, in our case, the money going from the shopper to the clerk, the clerk took the money, gave it to his boss. His boss bought wine from a distributor. The distributor charged the retailer for the wine. The retailer paid the money to the distributor. The distributor took the money and had to buy the wine from us. And then we shipped the wine to the distributor, then we had to pay all our bills. And with what was left, we used that to pay the salaries. All of a sudden they went, it was clear. There was no question how the money got to them. And they could also see their job in the context of the map.

Years later, fast forward today, we're working for other companies and we're helping them with their company culture, and the first thing we recommend is, what does your money map look like in this company? Let's start with where the money really starts and how does it get to your employees? And when they're hired, let's give them this map on day one so there's no question in their mind. People are funny, they'll answer questions that they won't ask in their mind on day one. We like to say, when the cement is wet, you can move it with a trowel. When it gets hard, you need a jack hammer. If you were like, wait two or three weeks before you explain where the money came from, or if you thought, well, that's so dumb, I don't have to explain it to anybody it's obvious, well, guess what, you're going to need a jack hammer.

C. Lee Smith: I don't want to insult them by bringing this topic up now, after they've been through three weeks of training already, right?

Michael Houlihan: Yeah. That's it. But it's like what's the first thing you tell them? I think the first thing you say is, in our case, here's a customer in a supermarket, here's what she's looking for. Here's our product and here's how it got there. And here's how the money goes and changes hands. Then when somebody starts talking to the employee about a distributor or about a report or about a depletion or something that has to do with that money chain, they immediately go back to the map and they go, "Oh, that's right. That's how I make my paycheck."

C. Lee Smith: So, if the wholesaler's not happy or if there's a logistics problem or the retailer is giving shelf space then to a competing wine or something like that, that all disrupts then the chain of the money that comes from the customer into my pocket.

Michael Houlihan: Exactly, exactly. I like to tell the story of the guy that came into my office one day and he said — and this was before we had the money map. He said, "My wife is pregnant, I need a raise." And I said, "Wait a minute," I said, "are you accusing me of something here?" But that was about as far off base as it could possibly be to ask your boss for a raise with no reference to an increase in sales or production or a reduction in cost.

Audrey Strong: Well, right. And is there a ratio, a best practice for managers that are listening that people don't understand if they've never been in business for themselves or have an ownership lens that they can learn through what you're teaching. That if you say I want a $10,000 raise, how much does the business really have to generate to provide that money? Is it a 2:1 ratio, 3:1? They don't understand, they think 10 grand is 10 grand is 10 grand, and it's not.

Michael Houlihan: Well, most businesses they like to brag, but most businesses run on about a 10% profit margin if they're lucky. I mean, some 20% but you're not going to see very many businesses out there running on 100% profit margin. Now, that's just profits, okay. If it's 10% profit and it's 90% cost, and so you have to take a look at it that way, and you start to think if the costs don't expand, well then, the raise is coming out of profits, so now you're making less. So, you have to expand your costs. I mean, you have to expand your overall gains, your gross income in order to be able to afford profits. But if costs are 90% of your gross, you really got to increase your gross before you can increase that 90%.

C. Lee Smith: You mentioned a two division company, which is something I've always found very fascinating, because I mean, our company is SalesFuel, so we work with a lot of sales departments across the North America, I'm fascinated by that. Tell me, what departments do you put into sales and what departments do you put into sales support?

Michael Houlihan: Well, that's a good one. I put sales and customer service into sales. The reason is because they're the only two compartments that talk to your customer every day. They know what's wrong with your product. They know what the complaints are like. They know what the competition is like. They know what the market is like, and they know what the dynamics of the market are. Now, everybody else works in sales support, especially marketing and production. Now, a lot of companies are going to throw a red flag on the play and say, "Well, we can't have a two division company. We've got divisions of labor. We've got specialization." That may be true, but you can at least have some direct lines of communication between sales and customer service on the one hand and between marketing and production and administration on the other.

C. Lee Smith: Some people will — actually, the marketing folks that are out there will actually cry foul on that one too, saying, "Wait a minute, we affect sales." Some marketers even think that sales is a product of marketing. I think they got it backwards, personally, but what would you say to that?

Michael Houlihan: Well, it's interesting, when sales are up, marketing always takes a big deep bow. And then when sales are down, they point their finger at those guys out in the field. So, the difference between marketing and sales, to me, is marketing is the game plan. It's the way that you approach the market. It's all the marketing materials. It's everything that you're telling the general public about your product. Now, the sales people, they're generally outside. They're not inside. They're generally outside and they're beating the bricks, and they're going into the stores, and they're going into the buyers' offices. They’re getting their butts kicked in the real world. For them, they're kind of like the guys who are really pulling the whole horse show right there.

You take a look at sales and you take a look at customer service and you ask yourself, what's the best way to keep my products relevant? Well, it's not going to be a focus group from the marketing department. You're going to ask the sales people and the customer service people what the customers think about their products today. What is the competition doing? All those kinds of things. Yes, you can do focus groups and study groups and all that other stuff, that's wonderful. But these guys have got dirt under their fingernails. They're dealing with the grist of the marketplace. Who better could tell you what's wrong with your products?

Audrey Strong: In real time.

C. Lee Smith: As a fellow entrepreneur myself, I wanted to ask you this question—what one thing that you had to stop doing before Barefoot Wines really took off and made it big?

Michael Houlihan: Oh, I had to stop convincing myself that it was such a great deal for people. I mean, you get carried away with your product. You get gold medals or you get write ups and heck it's only $5, and you're absolutely sure that this is a terrific deal for people. The people who are the buyers, they don't care about that. They want to know, is it going to turn on my shelf? When you talk to the distributor, they don't care about that. They want to know, are you going to sell the largest retailer in my territory and give me more strategic power as a result of representing your brand? And then the distributor sales people, they don't care either about features and benefit. They want to know how big is the commission, how big is the spiff? When I make the sales, what are the goals? So you get right down to it until you're actually talking to the clerk, who puts it back on the shelf. And what he wants is to feel him important, and you got to take him out to lunch and buy him a ball cap. This is the kind of thing that we learned, which is that there's many different kinds of sales, and every one of them has a different need. It's not enough just to have a terrific product at a terrific price. You have to satisfy everybody along the distribution chain. That's the one thing I had to stop doing was selling features and benefits.

C. Lee Smith: And every single one of those people though came at it from 'what's in it for me?' When that case of bottle is right there, what's in it for me? If I take this on, what's it going to do for me? Even the customer is like, okay, is it going to pair well with fish? Is to go make my wife happy?Michael Houlihan: Absolutely. It is a real science for us to just understand — this is the problem, I think, with a lot of companies is they focus on their end user and well, they should. But they should also focus on all the people between them and their end user. Because like in our case, we're selling in retail. Hey, guess what, you can have the best product in the world. If you're out of stock, it doesn't matter.

She's going to say you're undependable. She's going to look for a brand she can depend on. It might not be your fault. It might even be the store fault. It might be the distributor's fault, might be the trucker's fault, who knows. But the bottom line is your people have to police it. They have to be constantly vigilant. You have to be aware of what everybody wants to keep that chain moving.

Audrey Strong: Speaking of people, I know Lee wanted to ask you about hiring for hustle specifically. Explain what you mean by that and what your advice is to our audience.

Michael Houlihan: Well, hustle is the ability to get things done in a rapid fashion. It's not sloughing your feet along, right? It's not looking at your toes. It's not getting around to it. It's having a sense of urgency. So what we like to do is look for people who have a sense of urgency, people that can think on their feet, people that can move, they understand how to prioritize. You know, if you give them five or six things, they can put them in priority. They know what the most important thing is to do first, second, third, and fourth. Unfortunately, because of technology, you've got a screen on your computer. It has everything on the screen all in icons. One of the things is called settings. Imagine how important that is compared to the one called pictures. See, so the ability to pick out settings would be something you'd be looking for.

C. Lee Smith: One of the things that we do here, I mean, we give our candidates homework to do. We give them an assignment. We give them a deadline date. And then we make sure that it's on time. We review the work, that sort of thing. We take people out to lunch and we see how they treat the waiter and what type of table skills do they have and that sort of thing. Mostly, they're going to be polite, nice people, can they carry on a conversation? That sort of thing. You've got some other ones in your book, The Entrepreneurial Culture, that I really like, starting with the one—look in their trunk. I love this one.

Michael Houlihan: Oh, yeah. Well, one of the things that we used to do was we would invite people over for an interview and we would always, whether they pass the interview or not, we'd say, "Thanks for coming over. We want to give you a bottle of wine. We want to put it in your trunk. It doesn't want to be in the passenger compartment." That would give us an opportunity to look in their trunk. And oh my God, if they had a bunch of papers with tools on top of it, we would realize that this person have a way to go before they could actually work for us. It was always a great way to tell how organized a person was. Another thing that we'd do is we'd invite them over to our house, they'd spend the night, they'd go to the office the next day for a series of interviews, but we would check them out. After they left the house in the morning, we'd check out the room, we'd see how they left it. We'd check out the bathroom, see how [crosstalk 00:18:02] You know what I mean? It's like, these people are representing you and your business. If they're not disciplined, if they're not tidy, they aren't going to be for your customer. So, my attitude is let's not give the customer another reason to say no.

C. Lee Smith: What I find fascinating about that is that the sales people are notorious though for having messy cars.

Michael Houlihan: Not ours, not ours.

Audrey Strong: Because they're in them so much, is that the theory?

C. Lee Smith: I guess so. I mean, because it's like I'm driving, I'm getting from point A to point B. I got to see that customer, got to see that customer or whatever. And then they're eating fast food in the car and there's wrappers and it's just disgusting.

Michael Houlihan: Yeah. I have ridden in many of those cars, I know the feeling. One of the things that you guys might enjoy is one of the ways that we would discover a candidate that we wanted was, on the last day of the interview, we'd sit them down and we'd say, "Now, today we're going to do all the talking. You're just going to sit there." And so then we'd tell them, "This is our company. These are our competitions. This is our major challenges. Here's how the job that you are applying for affects those challenges. Here's what you can do. Here's what you don't do." And then we'd say, "All right. You got that?" And they'd say yes. And then we'd say, "Okay. Here's what we'd like you to do, tomorrow afternoon by 5:00 PM, we would like you to submit a one-​page document that indicates what I just told you and how you fit in." And you know what’s funny? Only one out of three people could do it and they'd passed all of our other exams. Scary to think that they got that far, and they would have these wonderful resumes written by professionals. You're really measuring their comprehension. You're really setting yourself up, because you don't really want hire the person that keeps saying, "Like what?" You want hire the person who gets it and can apply an example from one situation to another because they grasp the principle. And you also want people that can do things on time and under pressure. So, you learn a lot by that little exercise.

Audrey Strong: That's a good one. We're going to have to start doing that, Lee.

C. Lee Smith: Well, the listing skills is really what you're testing first and foremost. I mean, it's like — and they'll nod their head and they'll tell you every time, "Oh, yeah, got it. Yeah, heard everything you said." It's like, no, you didn't.

Audrey Strong: Well, Michael's website is thebarefootspirit​.com. And if you have an opportunity to see him speak in person, I cannot encourage you enough to attend.

C. Lee Smith: He's terrific. He's worth every penny.

Michael Houlihan: Well, thank you.

Audrey Strong: Yeah. For 2019, do you have any of your speaker events lined up that you want to share?Michael Houlihan: I've got a couple coming up. Yes, I believe that I'm going to be speaking down in Texas at the National Business Network — the International Business Network. And then we have several engagements, next year we're going to be in Europe. We're speaking at Nanyang University in Singapore and also Skolkovo University in Moscow of all places. It's going to be very interesting. We're doing something next year that's really fun, your listeners will love. We're putting together a 1940s style radio theater version of our New York Times bestseller. So instead of having a narrator droning in your ear buds a book, reading it to you, it's going to be acted out for you by various different Hollywood actors that play characters. You're going to participate. So it's a kind of experiential learning, where you're going to participate by building the stage in your mind and the props. Somebody says, "So this takes place in

the back room of a supermarket," well then your mind goes to what that must look like. You get a few props thrown at you and then you hear these people talking. The idea is that you'll remember more when you hear a story. The audio book is going to be 30 short stories, anywhere from 30 seconds to 3 minutes long. So, you can listen to them while you're jogging or driving, and put it down when you're done and pick it up again. We’re really excited about this. It's going to be out in January. So check out our website to see when it's coming.

Audrey Strong: Fantastic. Yeah, once again, the website thebarefootspirit​.com. Michael, thanks for coming today. We really appreciate it.

C. Lee Smith: Terrific.

Michael Houlihan: Thank you very much.

Audrey Strong: Yeah. Everybody, managesmarter​.com has all the episodes, the archive of the show. Michael, such a privilege having you. Please,  subscribe, rate and review this podcast, tell a friend and share it with a coworker. Everybody needs to hear what Michael had to share with us today. And again, we thank you for joining us.

Michael Houlihan: Thank you very much.

C. Lee Smith: Thank you, Michael.

Michael Houlihan: Lee, great to see you, Audrey.

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